Within the above article Mish (Mike
Shedlock) of Global Economic Trend Analysis responds to a
report from the Australian Daily Telegraph "Revealed: The home loan that could save you
a fortune", where Australia’s fifth largest mortgage
lender ING Direct, is now selling interest only mortgages
with no fixed terms.

This is an understandable response
(although a seriously unwise one) by financial sector
participants due to the grossly inflated Australian housing
prices, as illustrated within the 2010 6th Annual Demographia International
Housing Affordability Survey, where Australia’s major
urban markets at 6.8 times annual household earnings (3rd
Qtr 2009 data) were the worst, in what is loosely termed the
Anglo world.

Expect the next “idiotic innovation” from
Australia’s finance sector to be teaser interest rates at
the initial stage of the mortgage, that progressively
increases over time.

It would appear the Australians are
following the example of the Californians across the Pacific
– where the Global Financial Crisis was triggered.

The
Californians had perfected distorted mortgages to the extent
that they were lending 11 times household earnings, where
households on a gross income of $90,000 a year were
borrowing $1,000,000.

The reality is that housing should not cost any
more than 3 times gross annual household earnings, with
mortgage loads of around 2.5 times household
earnings.

Australian Governments do not allow housing to
be built at affordable prices – and have failed to learn
from the land use and mortgage laws of the State of Texas,
where housing prices stayed at 2.5 times annual household
earnings, while bubbles raged in other poorly governed
United States housing markets.

The Demographia Survey
found New Zealand housing prices 5.7 times household
earnings; United Kingdom 5.1; Ireland and Canada 3.7 with
the United States overall 2.9

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